Everything you need to know about the debt ceiling

The federal government is in the middle of its first shutdown in 17 years. But that's not the only battle in the nation's capitol: for months, lawmakers have been preparing to raise the debt ceiling as soon as the Treasury said it was necessary, or not raise the debt ceiling and default on the United States' bills.

Treasury Secretary Jack Lew said in a letter to Boehner that the Treasury will run out of money “no later than Oct. 17.” The country has already actually hit the debt ceiling, back in May. Since then, Lew has been using what he described as "extraordinary measures" to keep the cash flowing. Those measures will be exhausted in less than 24 hours.

President Obama has said he will not negotiate on raising the debt limit, as he did in 2011. The President argues that his position is a fluke of contradictory Constitutional obligation: he cannot be required by Congress, on one hand, to spend a set amount of money; and then denied by Congress the ability to borrow enough money to do so.

Reportedly, Congress' best option now is to pass a compromise brokered in the Senate, between Majority Leader Harry Reid and Minority Leader Mitch McConnell. That bill would fund the government through January and raise the debt ceiling through February, with a condition to conclude full negotiations on a real budget — something House Republicans have resisted since April — by December.

Boehner has been working on a counter-proposal, but those plans have reportedly been undercut by the party's more conservative wing, which is skeptical of any attempt to continue or increase federal spending without major policy concessions from Democrats.

With the deadline fast approaching, a few questions are most important: What does the debt ceiling mean? Why must it be raised? What will happen if it isn't? Here's what you have to know:

The debt ceiling is a mechanism by which Congress authorizes the Treasury to borrow money. The federal government brings in enough tax revenue to pay about 68 percent of its bills for the rest of October. It must borrow the rest in order to pay out the expenditures that have already been authorized by Congress. Thus, the debt ceiling does not actually prevent spending — it only prevents borrowing money in order to pay back spending that has already happened.

Also important: most other Western democracies do not have a debt ceiling. We do; Denmark does.

By Oct. 17, the Treasury will have about $30 billion in cash on hand, which is far short of what is necessary to pay all of its debts, which include payments on Social Security, Medicare and a myriad number of Labor and Defense contracts. It has $42 billion in Social Security and Medicare payments coming due on Nov. 1. The Treasury must also make bond payments. Indeed, the global financial system is structured, in part, on the idea that Treasury bonds are the world's safest assets. Defaulting would turn that idea on its head — and the system with it.

Some Republican Representatives have already said that default wouldn't, in fact, be apocalyptic — that the Treasury indeed has enough cash coming in. This is true only if you accept the idea that the Treasury could prioritize which of its bills to pay and which of them to put off (if, for example, it had to only rely on tax revenue). This would mean that the Treasury could make its bond payments, for example, in order to prevent a global financial meltdown, while putting off less "essential" bills. (What would get put off? Defense contracts? Social Security? No one is saying.)

But the concept of "prioritization" may be practically impossible — the Treasury receives millions of invoices a day and pays them electronically — and would only prevent the worst-worst case scenario. It would still mean that the federal government would be unable to fulfill numerous obligations to its citizens, not including foreign-held debt. What's more, if the Treasury is forced to operate without a debt ceiling increase, it will mean a sharp, immediate and immense reduction in federal spending, which many economists agree will stall or even reverse economic growth.

One last thing: the Bipartisan Policy Center estimates that the ceiling needs to be raised by $1.1 trillion, to a total of slightly more than $18 trillion, to cover the nation's bills through the end of 2014.